Why did ASX BNPL shares get hammered today?

Here’s what might be weighing on ASX BNPL stocks on Monday.

| More on:
A person smashes a wall with a hammer, sending bricks flying

Breaking wall by hammer

Monday proved to be a bad day for ASX buy now, pay later (BNPL) shares as a new report found that BNPL services are worsening the burden of financial hardship on some consumers.

Let’s take a look at what might have weighed on ASX BNPL shares today.

ASX BNPL shares tumble on Monday

The share prices of Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), and Sezzle Inc (ASX: SZL) each tumbled into the red on Monday.

Sezzle reported the worst fall. It slid a whopping 15.61% to trade at $3.19 at the close on Monday.

The Zip share price also tumbled 9.73% to close at $4.36.

Despite spending most of the day in the red, the Humm Group Ltd (ASX: HUM) share price finished flat at 74 cents.

Meanwhile, Afterpay shares slipped 4.13% to trade at $94.18 after announcing the new date on which shareholders will vote on its acquisition by Square Inc (NYSE: SQ).

In comparison, the S&P/ASX 200 Index (ASX: XJO) lifted 0.13% higher in late trading after being in the red most of Monday. The All Ordinaries Index (ASX: XAO) wasn’t so lucky, falling 0.11%.

ASX BNPL shares might have been weighed down by findings released by Financial Counselling Australia today. The body found BNPL companies are failing to support customers in hardship.

BNPL increasingly used by those in financial hardship

FCA has called on the Australian Government to review the legal framework used by BNPL providers, and on the BNPL industry to improve how it treats customers in hardship, after it found a sharp increase in the use of BNPL services by those in financial distress.

FCA CEO Fiona Guthrie said current laws allowed customers to mishandle BNPL services:

BNPL can be used quite happily… but it can also be misused, and that’s because it falls outside of our credit laws.

What we need are safeguards, we need to find a way of making sure that this product operates in a safe way.

The body surveyed financial counsellors, finding 84% reported more than half of their clients had BNPL debt. That compares to just 31% 12 months ago.

Particularly noteworthy, respondents reported many people burdened with BNPL debt didn’t consider it to be debt. Thus, the debt often wasn’t reported to financial counsellors or services.

It reported Australians are increasingly using BNPL to purchase essentials such as food and bills. It also found that many prioritised BNPL repayments over essential expenses so as to not lose access to the services.

National Debt Helpline financial counsellor Deb Shroot also commented:

What we’re seeing is that, clients have maybe a credit card, a couple of personal loans, and… numerous BNPL products. This could be up to seven or eight different BNPL products from different companies…

We’re getting phone calls about BNPL products every single day.  

Financial counsellors were also asked to rate different BNPL providers’ hardship practices with 1 being awful and 10 being brilliant.

Of those rated, the ASX’s largest BNPL share, Afterpay came out on top. It was given a rating of just 5.9 out of 10.

Zip’s hardship practices were rated 5.5 out of 10 while Humm was the worst rated service provider – it was given a rating of 4.7 out of 10.

Should you invest $1,000 in Afterpay right now?

Before you consider Afterpay, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Afterpay wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Square, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on BNPL shares

a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.
BNPL shares

Zip (ASX:Z1P) share price tumbles 10% as top broker questions possible Sezzle play

Key points The Zip share price sank 9.66% today The news came amid mixed views on a potential acquisition of …

Read more »

Group of thoughtful business people with eyeglasses reading documents in the office.
BNPL shares

What happened to ASX buy now, pay later shares today?

Key points Buy now, pay later shares took a beating on the ASX today The Zip share price fell 9.66%, …

Read more »

young excited woman holding shopping bags SCA profit dividend results
BNPL shares

Why is the Openpay (ASX: OPY) share price up 7% today?

Key points The Openpay share price is almost 7% higher today The company’s Q2 FY22 results showed record transaction value …

Read more »

Disappointed woman with her head on her hand.
BNPL shares

Splitit (ASX:SPT) share price edges lower amid leadership change

Key Points Splitit shares slide regardless of company appointing experienced industry exec Incoming CEO, Nandan Sheth to serve as CEO …

Read more »

BNPL shares

Why is the Sezzle (ASX:SZL) share price rocketing 20% higher?

Key points Sezzle shares are rocketing after confirming takeover talks with Zip Zip is looking to acquire Sezzle but talks …

Read more »

two business men sit across from each other at a negotiating table. with a large window in the background.
BNPL shares

Zip (ASX:Z1P) share price higher amid Sezzle acquisition talks

Key points Zip has confirmed that it is in talks to acquire Sezzle Talks are at a preliminary stage No …

Read more »

sad party goer sitting alone after celebration
BNPL shares

Is the BNPL party over? The Zip Co (ASX:Z1P) share price plunges 25% this YTD

Key points Zip shares have already plunged a further 25% this year to date (YTD). The BNPL sector has suffered …

Read more »

a woman looks distressed as she stares dramatically at her phone whiloe holding her hand to the back of her head with a disbelieving look on her face as though she is experiencing loss or disappointment.
Broker Notes

Zip (ASX:Z1P) share price sinks 8% to 52-week low after brokers weigh in on its Q2 update

Key points The Zip share price has dropped to a new 52-week low Weakness in the tech sector and broker …

Read more »